A Cure for Red Tape

In Brazil, entrenched bureaucracies were delivering services badly and resisting efforts at reform. So in 1997, the Brazilian state of São Paulo created something called Poupatempo – “saving time.” The Poupatempo centres were one-stop shops that delivered federal, state and local services such as drivers’ licenses and national ID cards. Citizens could go through the old bureaucracies if they wanted to, but Poupatempo was so much more efficient that they flocked there instead.

The Poupatempo initiative is an example of something U of T law professor Mariana Mota Prado calls “institutional bypass.” She thinks it’s a method that could help developing countries make difficult changes when established institutions such as government bureaucracies, court systems or police are standing in the way.

Prado is originally from Brazil, and often returns for visits. During one stay, she heard about an elite police unit that was set up to bypass the corrupt Rio de Janeiro police force. Prado was reminded of Poupatempo and realized that bypassing dysfunctional institutions might be a strategy that could be applied elsewhere.

The idea that institutions matter in development came to the fore in the 1990s. Douglass C. North, a renowned economist, argued that dysfunctional institutions are both the cause of economic problems in a country and an obstacle to aid efforts. If aid was simply going to be stolen or wasted it would never do anyone any good.

International aid organizations began reforming problem institutions. But Prado says reforms often don’t work. A dysfunctional organization will have a constituency that benefits from the status quo and doesn’t want to see it change – corrupt officials who gain income from bribes, for instance, or civil servants worried that their jobs are at risk.

This is where institutional bypass comes in. Reformers may lack the power to change an existing institution wholesale. But they might be able to bypass it, since the bypass is often seen as less of a direct threat to the institution. “Right now, when we try to reform existing institutions, we need to deal with this internal battle,” Prado says. “Bypass creates an alternative venue. Groups who want reform can support it. It also creates an alternative within the government.”

In India, for instance, the government established a parallel legal system called the Debt Recovery Tribunals, designed to make it easier for banks to recover bad loans. Litigants can choose to use the existing civil courts if they want. But the tribunal’s streamlined procedures make them more attractive to users.

Ideally, the new institutions will either replace the old ones or force the dysfunctional institutions to improve, Prado says. Even if they don’t, at least the services are being provided. For instance, in 2007 the Poupatempo served an average of 50,000 people a day in the state of São Paulo.

Prado will publish a journal article on institutional bypass next year and is working on a book about the concept, which she hopes will include case studies from Brazil, India, China and elsewhere. – Kurt Kleiner